Brevan Howard, or BH Global, one of the largest hedge funds in The UK (and the world) is out with their November letter. We have the highlights on some personal changes, returns, and comments from Alan Howard.

Personal changes

Effect from 1 January 2013, Lord Turnbull will resign as a non-executive director and Independent Chairman of the Company to pursue other commitments. The Board has resolved to appoint Sir Michael Bunbury as non-executive director and Independent Chairman.

Other Changes

In November, the Investment Committee made adjustments to the target portfolio in order to improve diversification. These changes will become evident at the end of December as redemptions in the Underlying Funds are reinvested in their new target funds.

To assist in BHG’s discount management programme, use was made of the liquidity facility. The redemptions placed in the Underlying Funds to service this facility have taken into account the current target allocations and will facilitate the asset allocation.

Returns

Brevan Howard Master Fund Limited, the flagship hedge fund has returned 0.81% as of November 30th. During the month, BHMF generated gains mainly on directional positions in European rates and in European government bonds. Small gains in USD rates and credit trading were offset by small losses in commodities, equities and interest rate volatility trading.

The best performers for the month of November were Brevan Howard Asia Master Fund Limited, and Brevan Howard Emerging Markets Strategies Master Fund Limited, up 1.32% and 1.46% respectively.

Alan Howard provides some of his outlook on the global economy, and as we noted in previous months, he has become increasingly bearish on international growth.

On the US he expects some sort of fiscal cliff deal to be reached, but he notes that a housing rebound will not be enough to drive the economy. Recent developments suggest the economy is slowing into the end of the year. Howard believes Fed policy is note aggressive enough noting, core PCE inflation has been below 2% on a year-over-year basis for four years, a remarkably long time, especially in light of investors’ fears (now mostly mothballed) that the Fed's extraordinary actions would promote inflation. Quite the opposite has occurred, which suggests that, if anything, policy has been too tight.

Europe is still a mess as well. The EMU economy continues to deteriorate and the unemployment rate is on an accelerating path. In France the number of unemployed people rose to 3.1 million in October, at a pace that was the fastest since April 2009. Unemployment rose in Spain to slightly below five million in November, while the unemployment rate stood at 26.2% in October. In Greece, the latest data showed that the unemployment rate in September rose to similar, extremely high readings. In Italy unemployment climbed to 11.1%: a 0.3% jump in a single month. German industrial production fell sharply in October, on top of a decline already seen in September. However, there is slightly more optimism regarding the UK, where he believes underlying growth in the UK is around 0.0-0.5%, and expects that pace to continue in 2013.

In Japan, there are signs that the pace of economic contraction, quite severe in the third quarter, is abating in the fourth quarter. The improvement appears to stem primarily from the domestic side of the economy, while the export side remains problematic.

Finally, in China November activity data showed a continued recovery in economic activity. China’s manufacturing PMI rose to 50.6 from 50.2 in October while IP growth accelerated to 10.1% year-on-year from 9.6%.

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